Indian Market Brief: Sectoral Shifts and AI Realignment The Indian equities landscape is undergoing a structural transformation as of February 2026. Heavyweight sectors are trading places in influence, driven by technological disruption in software and a robust credit cycle in finance. IT Services: The AI Recalibration The Nifty IT index has faced a significant reset, declining more than 13% since the start of 2026. This sell-off is rooted in shifting growth expectations as Artificial Intelligence moves from experimental phases to large-scale deployment. Investors have recalibrated valuations, reflecting a 22.4% drop over the last 12 months. The sector's weightage in the benchmark Nifty 50 has contracted to 8.7%, down from 13.05% at the start of the previous year. While the India AI Impact Summit 2026 highlights massive infrastructure scaling, including 38,000+ GPUs, the software services model is under pressure to evolve beyond traditional maintenance. Banking and Finance: The New Growth Anchor Financials have emerged as the primary market driver, with the banking sector's weight in the key index rising to a record 27.6%. This rotation is supported by healthy credit growth, which is projected to expand by approximately 10.8% for FY2026. Asset quality remains a core strength as the non-performing asset (NPA) cycle bottoms out. Gross NPAs are expected to remain controlled between 2.3% and 2.5% by the fiscal end. Despite high credit-to-deposit ratios and a minor decline in net interest margins, the Bank Nifty has gained roughly 24% over the past year, significantly outperforming broader benchmarks. Manufacturing and Capex: Policy-Driven Momentum The manufacturing and capital expenditure themes are reinforced by the Union Budget 2026-27, which allocated ₹12.2 trillion to public capex—an 11% year-on-year increase. Manufacturing GVA growth reached 9.13% in the second quarter of the current fiscal, signaling strong industrial momentum. Infrastructure and defense remain the primary beneficiaries, with defense allocations rising 18% to ₹2.19 trillion. While the fundamental outlook for electronics and semiconductor manufacturing is at an all-time high, high valuations in capital goods stocks remain a point of caution for new entries. Automobiles: Recovery in Commercial Segments The automotive sector is witnessing a "tale of two halves." While overall volume growth is expected to moderate to 3-6% in the coming fiscal, the commercial vehicle (CV) segment shows resilience with a projected 4-6% growth. Bus volumes are a specific bright spot, expected to grow 7-9% due to replacement demand from state transport undertakings. Premiumization continues to drive margins in the passenger vehicle and two-wheeler segments, even as entry-level demand remains sensitive to price hikes. Consumption and FMCG: Margin vs. Volume The FMCG sector reported a 9% revenue growth in recent quarterly data, but this was largely supported by GST adjustments and price corrections rather than organic pricing power. Volume growth has stabilized at approximately 6%. Although easing inflation and falling input costs for palm oil and crude provide some relief, the risk-reward ratio remains unfavorable for many investors. High valuations in staples persist despite the completion of the earnings downgrade cycle, leading to a selective approach focusing on premiumization and wellness categories.